Retail Sales in U.S. Climb Excluding Auto Dealers

Retail sales in the U.S. outside of auto dealers climbed in September, indicating households were sustaining the economic expansion before the government shutdown shook confidence.

The 0.4 percent gain in purchases excluding vehicles followed a 0.1 percent increase in August and matched the median forecast of economists surveyed by Bloomberg, Commerce Department figures showed today in Washington. Total sales dropped 0.1 percent, restrained by the biggest decrease at auto dealers since October 2012, as purchases early in the month were included in the August data.

Americans snapped up the newest cellular phones and video games last month as low borrowing costs and rising household wealth backed by improving home and stock prices gave them the wherewithal to sustain demand. At the same time, the 16-day partial closing of federal agencies may have upended spending this month as consumers grew increasingly concerned it would hurt the world’s largest economy.

“Consumers continue to hold in despite all the uncertainty going into the shutdown,” said Millan Mulraine, director of U.S. rates research at TD Securities USA LLC in New York, who accurately projected the gain in sales excluding autos. “We ended the quarter on a fairly solid note. Whether this buoyancy can be sustained remains a question after the hit to consumer confidence from the shutdown.”

Confidence Slumps

Another report today showed consumer confidence declined in October by the most since August 2011 as the budget impasse and debt-ceiling negotiations in Washington took a toll on outlooks. The Conference Board’s index slumped to 71.2 from a revised 80.2 last month, the New York-based private research group said today. The median forecast in a Bloomberg survey of economists called for a decrease this month to 75. The October reading was the weakest in six months.

Stocks rose, with the S&P 500 Index extending a record, as the drop in sentiment fueled bets the Federal Reserve will maintain stimulus as it starts a policy meeting today. The S&P 500 climbed 0.4 percent to 1,768.57 at 12:21 p.m. in New York.

The median estimate in a Bloomberg survey of 80 economists called for a 0.2 percent advance in producer prices. The so-called core measure, which strips out volatile food and fuel, increased 0.1 percent after being unchanged in August.

Survey Results

Total retail sales were projected to be unchanged, according to the median forecast of 86 economists surveyed by Bloomberg. Estimates in the Bloomberg survey ranged from a 0.3 percent drop to a gain of 0.6 percent.

Nine of 13 major categories showed increases last month, led by a 0.7 percent advance at electronics dealers, the biggest since April, and 0.9 percent gains at both grocery stores and restaurants.

Vehicle demand remains a bright spot even though a quirk in the industry calendar hurt sales last month, data show. Cars and light trucks sold in September at a 15.2 million annual pace, down from an almost six-year high of 16 million the prior month, according to data from Ward’s Automotive Group. Deliveries for the first two days of September, including the Labor Day holiday, didn’t contribute toward automakers’ tallies because they were counted in August figures.

Auto Sales

Toyota Motor Corp., Honda Motor Co. and Nissan Motor Co. reported U.S. sales declines last month, with fewer weekend selling days and tight supplies of some models after August’s surge. General Motors Co. and Ford Motor Co. said earlier this month that the government shutdown posed a threat to an already slow economic recovery.

Excluding autos, gasoline and building materials, which render the figures used to calculate gross domestic product, sales increased 0.5 percent after a 0.2 percent gain in the previous month. A separate category known as the control group, that also excludes such sales as food services, rose 0.4 percent last month.

Purchases of electronics probably got a boost from the Sept. 20 release of Apple Inc. (AAPL)’s two new iPhones models. The company sold a record 9 million iPhones in the weekend debut that included China among overseas markets.

Video Games

Retailers may have also benefited from the surge in purchases of video games, whose 27 percent jump last month was driven by Take-Two Interactive Inc.’s “Grand Theft Auto V.”

Some companies project demand will pick up in the November-December holiday shopping season after a lull this month. United Parcel Service Inc. (UPS), the world’s largest-package delivery company, said it expects daily shipping volumes to rise 8 percent during the peak shipping period between the Thanksgiving holiday on Nov. 28 and Christmas, led by growth in online shopping, according to an Oct. 25 statement.

“Looking to the fourth quarter, although some major retailers have expressed caution about holiday spending, they still expect robust online sales,” Kurt Kuehn, UPS’ chief financial officer said in a separate earnings release.

Household wealth is getting a boost from a rally in the stock market, with the Standard & Poor’s 500 Index up 23.6 percent this year. Home prices in 20 U.S. cities rose in August from a year ago by the most since February 2006 as stronger demand boosted values, according to the S&P/Case-Shiller index of property values.

Fed policy makers, meeting this week, are trying to gauge the strength of the U.S. expansion. The central bank will wait to pare the monthly pace of asset buying to $70 billion from $85 billion until its March 18-19 meeting, according to the median of 40 responses in a Bloomberg survey this month.